Rio Tinto forecasts continuing strong copper price

Bloomberg

Rio Tinto Group, the world’s third-largest mining company, forecast high copper prices will continue before supplies from new projects damp the market.

“We will see a continued period of strong copper pricing, largely because many of the large mines, including our own, are seeing declining grades, deepening pits,” chief executive officer of -London-based Rio Tinto Tom Albanese told Australian Broadcasting Corp’s Inside Business television program.

Copper in London surged to a record last week and gained 52 percent over the past year as the global economic recovery gathered pace. The global supply -deficit will reach 822,000 tonnes this year, more than double last year’s shortfall, Barclays Capital said on Jan. 20.

“We’re working on several new projects around the world and I know, certainly our competitors are working on their own projects,” Albanese said in a transcript of the program, which was broadcast yesterday.

The longer that copper prices stayed at high levels, the more new supply would be induced, he said.

Three-month copper on the London Metal Exchange gained 0.2 percent to close at US$9,961 a tonne on Friday, after rallying to an all-time high of US$10,160 on Feb. 7. Rio Tinto rose 1.6 percent to 4,623.5 pence at the 4:30pm close of trade in London.

Rio Tinto’s expansion plans include the Oyu Tolgoi copper project in Mongolia, while the company also had “additional opportunities” in South America and North America and at its Northparkes mine in New South Wales Australia, he said.

Rio Tinto posted record net income of US$14.3 billion for last year on Thursday, boosted by iron ore and copper prices. The company raised its dividend and announced a US$5 billion share buyback.

The global refined copper deficit of last year is expected to increase through this year and next year, leading to more talk about substitution with other materials, Rio Tinto chief economist Vivek Tulpule said in a report released with the earnings.

“The prospects of rapid and significant material switches are expected to be limited in the near term given the substitution that has already taken place,” he said.

The introduction of exchange-traded funds in copper could also have a “significant impact” on copper prices in the coming year by adding to investment demand, Tulpule said.

Consumption trends over the next 15 to 20 years would lead to a doubling in demand for iron ore, copper, aluminum and other commodities, Albanese said in a results briefing on Thursday.